Much more effort required to open economies to trade, says ICC Open Markets Index

– G8/G20 countries failing to demonstrate global leadership on trade – Canada the only G20 country in top 20 for openness to trade – BRICS countries lagging due to restrictive trade policies

The Open Markets Index ranks 75 countries

Despite recurring pledges to roll back protectionist measures, the G8 and its larger sibling the G20 are failing to demonstrate global leadership on trade openness, according to the ICC Open Markets Index 2013. The biennial report, commissioned by the International Chamber of Commerce (ICC), indicates that only one G20 nation ranks among the world’s top 20 open trade markets.

The Open Markets Index ranks 75 countries using an aggregate score between one and six based on four factors: observed trade openness, trade policy, openness to foreign direct investment and trade-enabling infrastructure. It was commissioned by ICC to monitor whether governments are following through on their commitments to create genuinely open economies, including those made by G20 leaders at the 2012 summit in Los Cabos, Mexico.

The 2013 index found that the average score across the 75 countries was 3.6, a slight improvement on 2011’s average score of 3.5. The two highest performing economies, and the only two ranked as excellent in terms of overall openness (scoring above 5.0), were Hong Kong and Singapore. Meanwhile the worst-performing economies (scoring below 2.0), were Uganda, Bangladesh, Sudan and Ethiopia.

None of the G8 economies are among the top 10 and only Canada ranks in the top 20 worldwide (19th), G20 economies in general were found to be behind the global standard, with an average aggregate score of 3.4. As for the rest of the leading G8 and G20 economies, Germany ranks 22nd, the UK 29th, France 35th and the US 38th. The G20 countries were found to perform poorest on average in terms of observed openness to trade, with 19 of the 20 scoring only average or below average on this measure.

The BRICS countries are falling behind other economies with regard to openness to international trade. With the exception of South Africa, BRICS countries record below average indicators of trade openness, despite their rapidly expanding economies. While South Africa registered an aggregate score of 3.2, Brazil, China, India and Russia all scored between 2.0 and 3.0. One of the main causes of poor performance among these economies was restrictive trade policy regimes, with generally higher than average tariff levels.

“G20 leaders have consistently emphasized the importance of open markets, yet our research has found that they are in fact lagging behind the global average openness to trade,” said ICC Secretary General Jean-Guy Carrier. “Overall, the slight improvement on the global average since 2011 is encouraging as it means the international community has resisted the temptation of protectionism. However, there is still much work to be done to improve the openness of many economies.”

To provide a framework for improving levels of global trade, the International Chamber of Commerce last year launched its ICC Business World Trade Agenda initiative, in response to the stalemate in multilateral trade negotiations under the World Trade Organization’s (WTO) Doha Round, launched in 2001.

ICC’s World Trade Agenda outlines a series of measures geared towards achieving tangible outcomes from the Doha round of negotiations, and advancing beyond its remit. These include:

Concluding a trade facilitation agreement by the 9th WTO Ministerial conference in Bali, Indonesia in December 2013

According to a study by the Peterson Institute in Washington DC, if all of these agreements were ratified, total global export gains over the medium term might exceed US$2 trillion; total global jobs supported by export expansion could number 34 million; and global GDP gains could amount to US$2 trillion.

“The ICC Business World Trade Agenda provides a set of concrete recommendations that can be achieved at the next WTO ministerial conference later this year,” Mr Carrier said. “The 2013 Open Markets Index found that one of the most important areas for development is in trade policy and the recommendations identified in the WTA will help countries improve their score on this front.”

The Open Markets Index was prepared for ICC by K. Michael Finger, international economist and 30-year veteran of the GATT/WTO research division.